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Ambitious growth will lead to disparities: UNESCAP chief

Ashok Dasgupta

Mega infrastructure projects should be staggered to avoid inflation

Kim Hak-Su, UNESCAP Executive Secretary.

NEW DELHI: The United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) has held that India should aim for a steady growth rate of seven per cent over the next 10-15 years with an inflation level of less than three per cent so as to minimise social inequity.

In an exclusive interview to The Hindu here on Saturday, ESCAP's Executive Secretary, Kim Hak-Su, maintained that a higher growth rate of 8-10 per cent with a higher level of inflation in a fast-growing emerging economy such as India would tend to increase the already visible social disparity by creating large, but isolated pockets of prosperity. In effect, although the isolated pockets of prosperity would reflect in the country's high economic growth, the nation, at large, would not be able to reap the full benefits as the poor sections of the society in the rural and urban areas would tend to get poorer, he said.

Such problems do arise in the fast-growing economies, as had happened in South Korea, and correcting this to bring about balanced social equity throughout the country turned out to be a gigantic task, said Mr Kim, who is here on a four-day State visit.

"The ideal target growth is seven per cent with less than three per cent inflation. If the economy grows by more than seven per cent, it leads to overheating — that's fire as the inflationary pressure of 8-10 per cent will hurt the poor. So seven per cent growth over the next ten years means exactly double the present income," Mr Kim said.

Elaborating further, he said: "China did that, so why not India? India, over the last five years, achieved a growth of about seven per cent, on an average. In fiscal year 2006, your are expecting 8.1 per cent... That's realistic, but we must keep a balance.

Fast-growing economies have some problems too, side-effects. In the case of Korea, the condensed growth in one generation, all kinds of problems arose — disparity, some people rich, some others alienated, inequality and these are the issues of any fast-growing country... Another problem that arises is that the people tend to become too materialistic."

However, even to maintain a seven per cent growth rate over the next 10 years, India would need to develop quality infrastructure for which billions of dollars would be required.

Mr. Kim holds out a warning here too. He feels that the mega projects for infrastructure development "should be staggered" and should not be taken up at the same time. "The implementation of too many mega projects at one go would lead to shortage of raw materials, rising cost of labour and thus, inflation. This again, will tend to hit the poorer sections the most and is best avoided," he said.

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